Does Your Credit Score Matter If You Don’t Do Debt?

by J. Money on Tuesday, October 16, 2012

A long time ago I told my friend Brad from EnemyofDebt.com that not paying attention to your credit score is dumb. I refused to listen to him on all his thousand and one reasons why he could care less, and I thought the fact he said he had a score of “0” (yes, ZERO) was cockamamy. I’m pretty sure I told him it wasn’t even possible, which I later came to find out was kinda sorta untrue (it’s possible to have no credit score, which in essence is kinda like a “0,” even though it’s not).

Here we are though, 3 years later and much wiser in my age, and I’m starting to come around to the idea a bit more :) Not that I’m sold completely on the whole thing – I’m not, and I’ll totally continue to monitor my own ‘cuz I think it’s smart – but I do see where Mr. Brad is coming from more now. His stance can be simply summed up like this:

If you’re never taking out a loan again, why does your score matter?

An interesting take on the whole score game for sure. Especially if you’ve never really thought about it before. Why DOES your score matter if you don’t have any loans or credit to your name at all? Is your CASH worth less depending on what your score reads? It’s a cool way to think of things mainly because it’s so drastic. When was the last time you decided to never have a loan or credit card?? Haha… for me it’s probably been a good 25 years, like when I was 7 ;)

And just like I thought 3 years ago when first debating against Brad, some of the same questions remain for those who believe it’s just not that possible:

How do you rent an apartment without a credit score?

How do you BUY a car without being able to take out a loan??

How do you get A HOUSE without taking out a mortgage?? Or mortgageS?

All common occurrences in our lives which we’re just so used to these days – something Brad says is part of the problem: Society has deemed taking on credit and loans as perfectly normal, so people rarely stop to consider the alternatives anymore! Nonetheless the consequences.

But what about those questions up there? What do people like Brad (aka the anti-debtors) say about ’em? I picked apart an email he had shot me a couple weeks ago where he was doing a Q&A with one of his readers (I had told him if he didn’t put it on his blog I was going to! Haha…), and he answers all 3 of those questions as he is always known to do: with passion and vigor :)

Renting an apartment without a credit score:

“You can definitely rent an apartment without a credit score. You can check out a service called eCredable.com that allows you to build a payment history to show landlords that you are financially reliable. It allows you to track your payments for utilities, rent, etc. It is a great resource! It’s also great to have an emergency fund savings statement showing how much you have saved up.

If you have no debt, can prove you are reliable, and can show you have savings, most landlords would be glad to have you. As a former landlord myself I know for a fact that a credit score really isn’t a reliable indicator as to how good of a tenant someone will be — financially or otherwise.”

Buying a car without a credit score:

“Buying a car is certainly possible without a credit score, assuming you are planning to buy one without going into debt. Having a car payment is one of the worst ways to own a car. You do not need a car payment to own a car as long as you buy a gently used 2-3 year old car that has had one owner who took care of it and can prove it. I do not recommend getting a car using debt — EVER — therefore your credit score doesn’t really matter when buying a car.”

AKA if you’re paying all *cash* for something, your credit doesn’t even become an issue. And I’d even tack on here that you could get a car for CHEAPER too if you presented the “all cash” option during your initial negotiations! Whether you buy it from a dealer, or from an individual. Here’s a good article Lance did for us the other month on paying cash for a car vs. taking out a loan, for what it’s worth. Even though it’s def. PRO-loanage ;)

Buying a home without a credit score:

“If you’re looking to get a house via mortgage one day, then you can do so without a credit score. It’s not as popular as other routes because society is so attached to their credit scores. It’s called “manual underwriting” and there are places that will take your real life information (renting receipts, eCredable reports, credit history (different than credit score), savings, income, and how much debt you have to evaluate your ability to pay a mortgage. (15-year fixed rate) My wife and I are paying cash for our next house so we don’t even need that.”

While pretty extreme, you can see it IS possible to function in this world without worrying about your credit and/or credit score. It mainly becomes an issue whenever you need to take out that loan or get approved for something/etc. (And maybe when you’re looking to get employment too as many companies now check out your credit too, whether you believe it’s right or wrong). If you have no plans on ever doing it though, why should it matter if you can get an excellent interest rate or not?

Brad ends his email to his reader like this:

“Chasing a credit score is a slippery slope and many experts still believe that it’s the only way to function in today’s day and age. It’s not true though and there are plenty of people living debt free without a single worry or care about their credit scores. It’s just a matter of how much you really want to be, stay, and live debt free. You don’t have to play the credit score game. The choice is yours…”

Interesting stuff to think about either way. Could I do it? No way. I enjoy taking advantage of my credit cards and loans to better leverage my money and (more importantly) my TIME, and I also like trying to compete for the best score too ;) As possible as the non-credit lifestyle may be for some, it’s just not that practical in my world. And I’m totally okay with that as long as things keep pushing forward and I don’t make any stupid mistakes ;) I’ll gladly take on a car loan if I can do something better with my cash instead, and I def. don’t want to wait 100 years to save up enough to buy a house cash-free either! Haha… Though I’ll gladly give Brad mad respect for doing so as it takes a LOT more restraint and patience that I’ll ever have, that’s for sure.

At the end of the day, though, I choose practicality and convenience over extremism. ‘Cuz I know myself well, and I’m confident I won’t get into much trouble using credit towards my advantage. If you DON’T trust yourself though, or you SUCK at managing debt/credit cards/etc, by all means stay away!! Maybe give Brad’s take some serious thought and slow things down a bit? There’s nothing wrong with choosing either side here as long as it’s the right one for YOU. So definitely consider your own habits when reading info about this stuff online, or wherever. You personality matters a LOT here.

Thoughts? Questions? Concerns? I’ll try and get Brad to watch this thread in case anyone wants to throw some zingers his way and/or give him props ;) He’s one of my best blogging friends I have, and I know he appreciates a good debate! So let’s see what you’ve got.

I have a friend who’s a millionaire and he has no credit score. He often complains about the hassles it creates, but his standard of living is such that he doesn’t need credit. I’m not there (yet) but the only debt I have is our mortgage and since I have no plans to incur any other debt, I don’t pay attention to my credit score. Much more fun to spend that time reading blogs! :)

This is going to be a hot button issue. Thanks for the mention of my guest post.

I think you know I’m on the have a credit score side. There are too many advantages in my opinion. Now I don’t think you should chase a perfect credit score but I think you should be aware of your score.

I could live without one but some people, no matter how much you convince them that ecredable is the same, will completely disregard it. If that house I really wanted to rent had a landlord that wouldn’t accept it I’d be screwed. If that job I really wanted required I have a credit score and their HR department decided to be ignorant and not accept ecredable I’m out a job!

NYTimes recently reported that there’s a bill working its way through Congress that would require utility companies to submit payment records to credit reporting agencies – so if you had a utility bill, you would have a credit score. (The idea is that it would give poor people a longer credit history and better access to credit…) So your friend’s “0” score may not be that way for long if he has utilities in his name.

Also, an argument for having a somewhat decent credit score – More and more, employers are using credit screenings as part of the hiring process. If your potential new job will involve money in any way, don’t be surprised if you need to give permission for a credit check as part of the hiring process. Heck, I’ve heard that some are just using it as a generic screening of “reliability” traits.

I’m with you on this, J Money. If I was the type of person to rack up a ton of credit card debt or take out a bigger loan than I could handle, it would be one thing. But I almost always pay off my credit cards in full every month, and the amount of money I’ve gotten back in rewards FAR outweighs the couple of bucks I’ve paid in interest here and there. I really, really hate that I had to take out a car loan, but my interest rate is so low that I’m barely even paying any interest on it. And I took out a pretty minimal amount of student loans, and the bump in income my masters degree gave me has more than paid for the amount of the loans.

I don’t sit around worrying about my credit score, but I do try to use debt wisely, in a way that will benefit me, as opposed to sink me into more debt than I can pay back.

I don’t worry about my score since I pay my bills off and use credit to my advantage. It is important to have good credit, because it does lower your costs for other services. Fair or not that is the way it is.

I like the idea of not having a credit score, but theres always complications attached to it.. I’m ok with not incurring debt for credit cards or car loans as these are the worse forms of debt. The mortgage issue is tough for the average person, so Im ok with borrowing for a home since it would take 20 years to save up to buy a home in my area. If I lived in the south or the mid west then I might pay cash for a home.

The convenience of using a credit card to make all of your purchases, leaving you with a single payment and no need to carry cash, is reason enough to establish a credit score. For people who are disciplined enough to make only purchases they can pay off at the end of the month (I’d wager that Brad fell into this category), a credit card represents convenience and savings through reward programs rather than a financial burden.

William – I agree. It’s a hassle, and one I don’t need. I love hearing people say that they do not plan to rely on debt to live their life. That’s music to my ears. :)
Pauline – That’s a great story! That landlord would have been stupid to turn you down. I know a lot of people who have a good credit score that are much higher risk than people with no score and no debt.
Lance – I agree with your statement about people dismissing eCredable but I think that’s changing. People are always quick to dismiss what they’re unfamiliar with, it scares them. One day long long ago the thought of not giving a crap about my credit score would have been a scary thought. Best decision I ever made — aside from the act of forsaking all debt for the rest of my life that is. :)
Mrs Pop – I think that would be much more fair! The problem I have with the credit score system is that in order to have one you have to go into debt or at least use a debt product. For people who choose not to do so but are still financially responsible and reliable it’s unfair to deny someone a job, an apartment, insurance etc simply because they do not play the credit score game. It’s a game where — for the most part — the lenders win because MOST PEOPLE do not pay their cards off each month and pay massive amounts of interest for most of their life.
Stephanie – It has nothing at all to do with not being able to manage a credit card, at least not any more. We did have problems at one time but have educated ourselves since then and have become completely debt free. I could have one if I wanted one which would allow me to build a credit score but I do not care to go down that road. It’s not important to me. Being financially responsible is and I can do that without playing the game. :D
Brian – I would argue that it only lowers your cost with regard to you borrowing money in the future and getting a better rate. If you don’t borrow money then there’s no advantage at all to chasing interest rates or a score.
Michelle – I think the problem for most people is that they chase and rely on their score, then life happens, and all of a sudden they have debt they can’t pay. I do think there is a responsible way to have a credit score. Having credit cards and paying them off is fine but it is still a risk — one that I no longer have to worry about. I have a problem with the fact that some people rely so much on their credit score that they make financial decisions based on what their score will or will not do and not what’s best for their family. For instance, not closing an account because if you do your score will drop. That’s BS in my opinion. The lenders must have been the ones that created that because it only benefits them. :)

Rich Uncle El — I’m okay with mortgage debt (15 year fixed rate) too although we plan to save up for our next home. We plan to buy some land and build a house on it using no debt. Different but possible. I like being different. :DMatthew — You’re right Matthew, I do fall into that category now but it wasn’t always the case. Like most people, I was horrible at managing credit but now I could totally have a credit card without worrying about racking up a bunch of debt, I just choose not to. :)Sean — If someone chooses not to borrow money in their life then that doesn’t mean they are financially irresponsible so to base employment on credit history isn’t very fair.

If I have $15,000 in my emergency fund, no debt at all, have term life insurance, and money being put away for retirement haven’t I been much more financially responsible than someone with multiple debt accounts (credit cards, car loans, a mortgage etc)? If life happens to me I can handle it a lot easier than if I had all those minimum payments. I would certainly be more likely to be able to pay my bills under anything life threw at me compared to someone in debt. Right? :)

My main argument is that contrary to what financial “experts” keep touting, you do not NEED a credit score. It can be used as a tool (for people who want to borrow money in the future) but it’s not needed and it’s high time society realizes the truth so they can choose an alternative to going into debt for a score. :D

I’m definitely with you on this one J Money. I like having a great credit score, but I especially like all the reward money I get by using my credit card. I’m all about paying cash for a car as I prefer to not finance a depreciating asset.

Brad I’m curious why you and your wife don’t prefer to use a credit card now that you guys seem to have built up your savings, are well educated about money, and would clearly pay off your balances in full every month. It seems to me like you’re leaving 1-5% on the table for most purchases. Do you feel like you would spend more money using your credit card than just having cash? Not trying to criticize at all, just curious now that you’ve made so much financial progress.

Mark — That’s a great question. I think my best answer would be that people are motivated by what’s important to them. I’m not motivated by credit card rewards and I can still get rewards using my Perkstreet debit card so I’m not completely missing out. :)

What I am motivated by is avoiding debt, and let’s face it, a credit card is a debt product that can turn into debt at a moments notice. I’ve talked with people who have paid their credit cards off every month and now find themselves struggling to pay their bills all because life happened. Now they’re treading water trapped under mounting interest and new minimum payments they never thought they’d have. I understand that doesn’t happen to everybody but it could.

I’m motivated by avoiding that and I love the idea that I will never owe anyone a single penny as long as I live. (assuming we don’t have any super high medical costs in the near future) I’m now dedicated to achieving Optimal Health and have lost 70 pounds with 40 left to go so that will definitely help me avoid the health care costs associated with obesity. LOL I do have Polycistic Kidney Disease and I will have some medical cost associated with a likely kidney transplant but we’re able to plan and prepare for those costs ahead of time. Thankfully! :D

Do I think I’ll spend more on a credit card? No not really. I use a combination of cash and our debit rewards card. Some things we use cash for and some things we use debit. Cash can be a useful tool for getting great bargains especially when buying furniture or cars but we like to earn rewards on purchases we make every month anyway by using our debit card.

Anyway, I didn’t feel criticized at all. I thought it was a fair question and I enjoyed answering it.

Evan, see my response to Mark. It’s not done to be different. It’s done because we believe it to be better than the status quo. The bottom line is we do not want to owe anyone any money ever again. It’s really that simple. In a country filled with people that are both broke and in debt, being different is definitely not a bad thing in my opinion. In this case being different equates to being empowered, liberated and free to live the life we desire. Earning rewards or having a “normal” credit score is not worthy of our attention because it’s not required for us to meet our goals and dreams. :D

We bought our then-new car with cash, but the only time our credit score seemed to matter was when we moved after being in the same rental for 27 years. I was surprised that even in the current economy, the property owner required proof of income of 3 times the rent. While my husband has a legit job with easy proof, I had to manufacture my own, which consisted of showing months of bank deposits to imply that income. For many of my rental years, I was far short of having a triple the rent income, but I never failed to pay the rent. As I like to say, it isn’t what you have, but what you do with it! I love not using credit.

Your story points out why a credit score is not a good indicator as to someone’s financial responsibility. It’s more of an indication of how well or poorly someone manages debt. It should only help a lender decide whether or not a person is likely to repay the loan. Other than that a credit score should have no significance. :)

Dang! Quite a discussion you got going here Brad & J Money. I choose to not live as a slave to my credit score, but use it if and when I need it. So I just have a credit card that I pay in full every month and that does well to keep my score up there in case I ever need it, but keeps me out of the DEBT TRAP!

Jenna – Not sure why you assume I don’t pay my bills on time. I do and even check my credit report annually to monitor possible fraud or mistakes.

As far as the “work” you refer to, I’m not sure what work that would be. You mean not having to keep up with credit card statements, keeping a proper debt to income ratio, whether I should keep open or close a credit account because it might damage my score, or worrying about whether someone else will deem me worthy of accepting their high cost loans?

To me that sounds like a lot of work. Life has been a lot less stressful since I kicked my credit SCORE to the curb. :)

Brad – how does not having a credit score affect you when you sign up for services (i.e., cable, electricity, gas, phone, etc.), as I have found that all of these require a credit check and force you to pay hundreds of dollars in deposits if you do not have good credit?

Wow! Don’t know if I can add anything to the conversation, but here goes.

I am completely with Brad on this one. I am out of debt except for the house, and believe that you just don’t need a credit score period. When you have debt, you are losing with money.

You can do anything you need to do with a cash only lifestyle, including getting a job, a car, etc. You just have to be proactive when getting a job and tell them up front that you have no score because you’re out of debt. You should be able to provide them with documentation if needed.

You can pay cash for a car if you just make a plan to do so. I wrote a post about it a while back titled “How NOT to finance a car” that shows how to do it. I’ve paid cash for our last two cars (a Lexus and an Infiniti) because I had a plan.

I think eCredable will become more accepted as time goes on. It is required by law that it be considered the same as a traditional credit score. I wrote a post about that too “You Don’t Need a Credit Score, Here’s an Alternative”

Basically, everything I write on my blog covers negates the objections of the credit score lovers and presents the credit score haters viewpoint.

Extremism? Some may think so. But it’s the extremists that change the world and do large things, good or bad. Think MLK, Ghandi, Billy Graham, Ben Franklin, etc. All extremists who changed the world.

Its funny how sensitive a topic this is, with people being offended that you are offering them a different way to look at the FICO.

I am in the “debt free, loving it, will never go back, and who gives a crap about our credit score” camp. :) We pay the few bills (utilities and mortgage) that we have on time, have lots and lots of money in the bank for emergencies and vacations and our next car purchase. I can’t see a single reason to try to maintain our credit score by opening up credit cards and putting small purchases on them and juggling money to make sure they are paid off each month. Whats the point? I don’t understand any of these arguments. Do you think all the people who are in over their heads in credit card debt decided to rack it up on purpose? No way. Just like Brad said, life happened to them and Visa was there.

If a company was going to hire me, and then the HR department was that crazy to not give me a job because I don’t borrow money (and hence no credit cards) I don’t think I want to work at a company like that, with no flexibility or creative thinking tactics. And show me one person who ever got rich on credit card rewards. Seriously.

We are so brainwashed. It sucks. Thanks Brad for fighting against the current.

Brad, I definitely agree about your point (in one of the comments) about how the system is set up to help the lenders. I’m kind of on the fence about this whole debate, but with a little suspicion about advocating for extreme ends.

I personally use credit cards for almost all of my purchases (for the rewards, why else?) and have a pretty good credit score. I’m not the one to chase a good credit score (by taking out a loan to diversify my credit types, for example) and I avoid debt for regular purchases and cars, but I am one to take advantage of getting a low interest rate for my good credit history/score when it comes time to buy a house (with a mortgage – in my neck of the woods, it’s nearly impossible to buy a home without a mortgage unless you work on Wall Street). As much as I would like there to be a different system, I just don’t see it really happening and it doesn’t matter that much to me as I can operate and take advantage of it just the same.

Lindsee — In my experience I have not had trouble with either getting low insurance rates, renting a car, utility bills or renting a place. As far as deposits I would happily pay a deposit in exchange for not playing the credit score game. :)Chris — That’s what I hear Chris, but I have not experienced it. for two cars we pay $60 a month and it only went up when I got a speeding ticket. LOL It may be a little different with home insurance but we rent right now until we save up to buy our next house with no mortgage.20’s Finances — I am not against anyone using credit cards as a financial tool though I choose not to. In fact, J Money was the reason I softened my stance on credit cards in general. I used to be completely ANTI credit cards no matter what but J Money taught me that some people can use them as a tool without jeopardizing their financial future. It doesn’t mean there isn’t any risk involved with doing so. I choose not to even play the game.

I realize my view isn’t for everyone but it’s been such a liberating experience to step away from that rat trap. It may seem extreme to some but that;’s really only because the supposed “experts” keep shouting from the rooftops that a credit score is not only needed but important to any financial plan. It’s just not true! It’s a choice and unfortunately the system is set up to benefit the lender more than the consumer. :D Thanks for sharing your thoughts. This has been fun for me!

I’m going to keep pressing hard to educate people about alternatives to the FICO score because I believe in freedom that much. :)

As a student, I never used credit cards — I paid with money from my chequing account, either cash, debit, or cheque for everything. (My university didn’t take credit cards for tuition payments.) I had an “additional card” on my dad’s Visa account in case of emergencies, and having it under his name and his credit history definitely meant I only used it for emergencies.

I took out [Canadian] government student loans, which enter repayment six months after graduation. Through some smart decisions and a bit of luck, I paid off my entire ~$32,000 before my loans went into repayment. Therefore, they never helped my credit score; my history showed I’d applied for credit but not that I was reliable at paying credit back.

It was a BIG hassle after my loans were paid off and I wanted to live alone. I had to pay massive deposits for rent, utilities, and internet connection because I had no history. Sure, I eventually got the deposits back — but the extra $1700 to move out was a huge hit to my budget.

Now I have a credit card. I put plane tickets on it when I travel, and occasional internet purchases, but that’s it. I pay it off in full every month and have a good credit score (747, which is funny given what I mostly use it for!) Having a score sure does make life easier.

I agree, $1700 is a lot to have to pay in deposits. I’ve never liked deposits but I don’t really see deposits as a bad thing — just an inconvenience. I think deposits are a good way to ensure the person taking the risk gets something if the person they are providing service to bails or can’t pay. It also gives someone incentive to take care, of say ,the place they are renting because they know they won’t get that money back if they destroy the place. I was a landlord once and it cost us $12,000 so even the small deposit I charged them didn’t even come close to covering the damage they caused. At least you get the money back. :)

Anyway, I’m glad that you found something that works for you and I’m super stoked that you paid off your debt. Thanks for sharing! :D

Glad you all enjoyed today’s convo! I’m still stuck in jury duty so can’t respond to each and every one of you, but I have been following this thread all day and have been really enjoying it :) MUCH more interesting than what I was doing for the better part of the day, haha… Big ups to Brad again for letting me gossip about him today, and even more so for responding to so many of the comments here. You guys are awesome!

There are so many reasons that it matters, but there are also so many reasons why it doesn’t. However, when you need a good credit score, it really matters. It doesn’t really matter if you never need it.
Huh? LOL.. I just gave myself a headache!

Wow! Everyone is so fired up about a 3-digit number that somebody ELSE uses to judge you. When was the last time YOU used your FICO score? That’s right, never. Banks use it, not consumers. Boy, they sure put the wool over our eyes.

And this whole thing about “getting my rewards by using credit cards”, everyone needs to take a step back and think about it for a minute:

Let me point out the man behind the curtain here: If everyone got points/rewards for using credit cards then where does the credit card industry get the money? BY PLAYING THIS SILLY GAME OF “I DO IT FOR THE POINTS” YOU ARE HURTING YOUR FELLOW MAN THAT DOESN’T PAY OFF THEIR CARDS EVERY MONTH. If we all stopped using 30-day revolving credit cards then the industry would shrink and I think we’d all come to the realization that banks are getting rich on those who can’t afford to play the game.

Brad: Thank you for sticking to your guns. When you need that kidney, give me a call

I know for a fact that my credit score helped me get lower auto and home insurance rates. I’m also pretty sure that there is another score related to the credit score that insurance companies use to “judge” you. I think by going extreme and saying that a good credit score is unnecessary, you might be harming those who might NEED a good credit score to get a job. I’m not a fan of that situation, but it is what it is.

I am still trying to understand your country’s credit score system. In my country you don’t earn points for using your credit card. You’ll be on some sort of list if you have too much debt (mortgage and student loans not included) and if you have trouble paying off that debt. Then you can’t get a loan or an extra credit card anywhere anymore. It does protect some people from getting into serious debt.

Rock on Brad! I totally agree with you on the whole no FICO score thing. If you are committed to not borrowing any more I don’t really see the reason to try to have a score. The thing is, if your only debt is a mortgage, you make the payment on time, and you pay all your other bills on time, your credit score will be just fine. That’s what my wife and I have been doing for the past few years and are score is still “Very Good” last time we checked. The myth that you have to have credit cards and car loans to have a good score is a total lie. Just have a mortgage and make the payment and you’ll be fine.

Like I’ve said before, somehow the FICO score went from being a way to measure someone’s credit worthiness to a way that we measure someone’s financial self worth. I’ve coached with couples and individuals that have been playing the FICO game and have a good score but still don’t have a clue where their money is going every month. Does that sound weird to anyone else?

J Money — J, thanks for giving me a platform to talk about something I feel so passionate about. Expect a movement to surface my friend! There are “OTHERS” that believe in this as much as I do. :Ddebtgirl — I know exactly what you are saying. Basically it depends on what your financial goals are and whether or not you plan to use debt in the future. :)Steve — My friend, as always, thanks for standing up with me on this!! Let’s fight to make “EXTREME” the new normal. Right now normal is broke and in debt. Kind of nuts that this is being called EXTREME though. Haha! I think people classify it as extreme in a way that naturally puts people off because no one WANTS to be extreme? One day people will see the credit scoring system for what it is; a sham used by the banks to manipulate people looking to be manipulated and controlled financially. To me THAT’S EXTREME!! LOL :DStacking Cash — not denying that but suppose you had no debt, a 6 month emergency fund, extensive proof that you are financially responsible verified via eCredable. How much more would you pay a month for home insurance. I’m asking because I don’t know. We are happily renting while we save up. What’s the difference that makes it so worth it to play the credit score game? :DEconowiser — That’s because in America our economy is based on DEBT and CONSUMPTION. Credit cards make that kind of economy possible. It’s sad but true. The people that represent the “pay my card off each month” camp are a small minority and do not represent the reality that debt is destroying most American families. I believe the credit scoring system and the myth that we have to “build” our credit scores to have “stuff” before we can afford it is a big problem in this country. Debt is consuming us but I believe this can be changed!! It’s why I’m not giving up! Debt is BAD…period! :D

I do not care about credit score, and except for buying a house 10 years ago, and refinancing three years ago, have never checked it and never will. I pay cash for everything. I do have a credit score as I have credit cards that I use regularly and pay off in full. But if I didn’t have one I wouldn’t care.

I am self-employed.
I own a house and have no plans to re-finance
I pay cash for my cars and have never had a car loan.

Why do I care about a credit score? Answer – I don’t. I just manage my finances to avoid debt and therefore can do what I like with my money. This business about obsessing about credit score gets people to look at things the wrong way around. I’d much rather people obsessed about savings or net worth.

Oh, and I find CC;s convenient, so I’m not in the “zero credit score” camp either. I need them for my work travel (I bill easily $3K – $5K a month on them for that), and I get several hundred dollars in rewards a year from them. I don’t pay any interest ever, as I pay in full every month.

Frankly crowing about a zero credit score is just as silly as crowing about an 800 credit score. I find the whole thing simply irrelevant.

“let’s face it, a credit card is a debt product that can turn into debt at a moments notice. I’ve talked with people who have paid their credit cards off every month and now find themselves struggling to pay their bills all because life happened. Now they’re treading water trapped under mounting interest and new minimum payments they never thought they’d have. I understand that doesn’t happen to everybody but it could.”

No, it can’t just “happen.” The only way it can happen is if you use it to pay for something you don’t have the money in the bank to cover. As long as you use it as a tool of convenience, and have the savings to cover it, what you posit isn’t possible.

As for me I NEVER use a debit card for anything. I had a bogus $6.20 charge from my grocery store (extra swipe I think – it didn’t go through but somehow charged me anyhow) on my debit card a few years ago. I never could get it straightened out. I chalked up the $6.20 to learning experience and retired my debit card completely. Now I just use it at the ATM to get cash, and for absolutely nothing else. CC’s are far safer in my personal experience.

The zero credit score thing is just a way to show contrast to an argument that a high score is what you NEED to obtain to exist financially. As J Money said ZERO isn’t really possible but the idea of not worrying about your score and basing your financial decisions on what’s best for you and your family financially regardless of what your score does is truly empowering and liberating! :)

The case we are making (not crowing about) is that people who want to live truly debt free can. For a long time it’s been said to be impossible but it’s not. People are doing it therefore it’s not only possible but a viable option for those looking for something different.

Diane, as for your last comment, you may disagree with it but it IS true. I have actually talked to people it has happened to.

So you’re saying that for people that do like you do and pay their cards off each month that a major life changing event — like expensive doctor bills — can’t cause someone to be overwhelmed with debt?

If your medical bills increase then so do your monthly expenses. If you can’t pay it you are in debt. When you don’t pay it, they come after you. What’s there to disagree with about that?

@Brad: I disagree that one has to charge that stuff on a credit card, that’s all. I don’t think I’ve ever charged anything medical, except for medication. If you have insurance and an e-fund, you are mostly covered. If you don’t and get hit by big medical expenses, sure you can go in debt, but it won’t necessarily be on your credit cards and you won’t wake up one day and “find” you are paying interest. That involves a conscious choice to use them to finance things.

Diane, what I’m referring to is say someone charges something in one month that they fully intend on paying off as they do every other month but because of increased expenses (medical bills, house repair, plumbing etc) are unable to. They now have debt that cannot be paid off by the end of the month. I wasn’t saying that someone has to use credit cards to pay those bills I was saying that because thy choose to use credit cards as a tool the risk is that something may come up that will prevent them from being able to make the payments. I’ll add this. If something like that were to happen and your expenses went up it can also cause people to use their credit cards for things they wouldn’t normally use them for because they have no other options. This of course is under the assumption that someone does not have adequate savings which a majority of people do not. just an example of how using credit cards as a tool can (and does) backfire on someone. :D

Another thing I’d like to point out is that I have worked with people that were more worried about paying their minimum payments so their credit score wouldn’t drop and in doing so neglected to buy enough food for their family. I know it sounds crazy but I have seen it happen. People do it every day. :)

@Jon White I’ve also coached people whose finances were in shambles, yet were concerned about their credit score…which was the last thing they should be worried about since their home is about to foreclosed on or other major problems–like $100K of student debt.

For those of you who are sold on credit cards and FICO. Here is an experiment, why not try for 30 or 60 days to live without your credit cards and see if you like it and compare your score at the beginning and end…you’ll always be able to go back and it will be fodder for a few blog articles.

Those might be options for people who don’t live in extremely difficult rental or home ownership markets, but I would really challenge you to make that work for you in the Bay Area, for example. Landlords have their pick of eligible tenants and banks are not very excited to make loans to people who don’t have a ton of $$ and perfect credit.

@Lisa: I’ve done it in the Bay Area. I moved here with no credit cards, no credit score, no car, no job, and got an apartment, a job, a car (I paid cash for) and eventually (after many years) a house. I’ve never really used credit much, and never worried about a credit score. Are you able to get everything right away? No. But does it stop you from getting what you want? Not that I’ve found.

This gives you some insight regarding the relationship of credit scores and insurance scores. I admire your challenge to the necessities of having a good credit score, but to disregard it completely is unwise. I have a 60 month emergency fund and I’m still concerned with having a good credit score because in this country there are many who will judge you by your credit score and insurance score whether you like it or not. Playing the credit score game is easy as long as you don’t over extend yourself. With the exception of the possiblity of overspending at times (I can admit that it happens), I use credit on my terms because I pay off the balance every month for the last 22 years with zero interest paid :)

@Stacking Cash — That’s pretty interesting but nothing I haven’t heard a million or so times. :)

So my question to you is this?

If I don’t plan to ever borrow another dime, not even for a mortgage, why does it even matter that my insurance rates will be slightly higher? It matters not one single bit actually and here’s why feel that way.

If I do not borrow money, not even for a house, this means I am paying absolutely no interest which equates to a pretty massive savings. Most definitely a lot more savings than if I chased my credit score around like a puppy dog in hopes of getting a slightly lower insurance rate.

How much money will I save by not paying insane amounts of interest for 30 years?

How much will I save by switching to Geico with a “rock solid” credit score? :)

I’m betting that I will pay a lot more in mortgage interest. No thanks I’ll take the slightly higher rate and keep forsaking my credit score.

Am I missing something here?

I don’t have all the answers and I’m certainly no expert on insurance rates so I welcome someone to explain to me how saving a few dollars each month on insurance rates will be a better savings than avoiding mortgage interest.

On a side note, I have two paid for cars and I pay $60 per month for both of them to be insured — one with full coverage and the other with liability. Over the years, especially since paying off our debt and kicking our credit score to the curb, our auto insurance has only gone down each year, not up. Three years ago we were paying about $90 per month.

20’s Finances — Thanks, it’s definitely working for us. :)Lisa — Please see Diane’s comment which totally rocked by the way. Your comment as one that is “self-limiting” and perhaps the reason you can’t accomplish the same things without a credit score. If you say you can’t, you can’t, but it doesn’t mean you can’t it just means you don’t believe you can. eCredable and MANUAL UNDERWRITING say you can do those things you mention even in the Bay Area. whether or not you’re willing to go that route is a different story all together.Diane — you totally ROCK! Thanks for jumping in there and speaking up about your personal situation and how you did accomplish those things contrary to popular belief. I believe Lisa’s comment was genuine as she probably truly believes what she said. It’s unfortunate.

Living debt free is a worthy goal most never achieve, which explains one down side to a zero score: you may pay more for phone service, car insurance, homeowners insurance, and other annuity-like contracts we all purchase. Many of these industries use scores to set prices and terms.

There is hard evidence that people WITHOUT credit scores are more risky to do business with than people with the WORST scores. This has been validated numerous times, across a variety of business applications.

The problem lies in verifying identity. Perpetrators of fraud love making up aliases, stealing identities, etc. By having no credit report you inadvertently lump yourself in with a large, very sketchy crowd.

I am enjoying it as well :) Did I tell you to carry a mortgage or a balance on a credit card? I just said to have a credit card that you religiously pay off every month so you pay no interest. That alone will give you a great credit score. Would it hurt to save a little money on insurance, be able to show your score to a future employer or even clients, and even be able to have 50k or more in an available credit balance to buffer your “emergency” fund? Most people could use a good credit score for those reasons alone.

I’m paying about $150 a month for full coverage insurance for 2 paid for cars. If my credit/insurance score was worse, I would have to assume I would be paying even more than that. Until I save up a 30 year emergency fund to insure myself, I will be paying others for that, might as well as save a few bucks in the meantime.

Here is what I see: Brad found a different way to go about life without a credit score and other people don’t see it as an acceptable way of doing things. I find it interesting that there is even a plausible way of living life without a credit score. Personally, I cannot accept anything but having a credit score, as I am still only valued by my credit score per many jobs that I had. Once I get above that status I may rethink having one, but it seems (from the comments on this blog and the links provided) that the government may soon change the way the credit score is used so all people will have one. If that happens, then it will be pointless for me to see if I want a credit score or not, because by then it may be government mandated to have one. (Maybe even then Brad will find ways of not having one.)

Kevin — I’m not surprised at all by your position. Credit scores are a BIG part of what you do. None of the things you mentioned as reasons to have a credit score phase me at all and I’ve made my case. I would be very interested in reading your hard evidence that suggests someone without debt who is financially responsible, can prove it with savings statements, eCredable.com, and has no negative marks on their credit report is more risky than someone who doesn’t pay their bills on time, probably has a crazy huge debt burden, and is most likely living paycheck to paycheck? I don’t buy it for one second but I would love to see what you have. I would bet money that it was done by someone with an interest in keeping someone dependent on a “good credit score”.

Stacking Cash — I apologize. Most of my comment was directed towards the link about credit scores and how they impact insurance rates.

People are telling me that I should build credit and maintain a credit score and the only way I see to do that is by having a credit card that I pay on monthly since I do not borrow money for anything else. (Not interested)

The reason I’m told I should maintain a good credit score is so I can have a mortgage (not interested), get good rates on auto and home insurance (explained in my previous comment to you), and so that I may be hired by some company that isn’t sophisticated enough to base their decision to hire me on my experience and value but rather a score that has nothing to do with either.

All I’m saying is that all of the reasons people say I NEED a credit score for I’m proving that I don’t. It’s a rigged system where the “dealer” wins because they create the rules and add additional rules not related to paying back debt so that people will continue to follow the system because that’s their only choice.

I’m here to say it’s not their only choice. I refuse to play that game and I am not missing out on anything at all. My life is much better than when I did chase that score and being completely debt free is more valuable to me than any benefit I would get from maintaining a credit score.

In my world FICO is dead and no longer controls my financial decisions. It might not be for everyone but for those that are interested in not being forced into a faulty system designed to keep most people in a constant state of debt and dependence, it’s a great alternative.

Remember that most people have TONS of debt and DO NOT pay off their credit cards each month. I believe it is because we’ve been brainwashed into thinking building a credit score was necessary in life which puts us in a position to rack up a lot of debt.

My message to everyone is that you DO NOT NEED to have a credit score to live a happy life or to have the things they say you can’t have without one — including a house with a mortgage. :)

Experts say it isn’t so, but I can prove them wrong every time!

Hi my name is Brad and I not only live without worrying about my stupid credit score (AT ALL) but I freaking LOVE IT!

I’ve done all the things you’re not supposed to be able to do without a credit score and no one has ever turned down my money. If they did, I’d happily take my money elsewhere because I know for a fact someone somewhere WILL take it.

I’ll add that I’m not the only one living this life. There are MANY others. :D

You summed it up pretty well and I understand why some people would not want to go the route I have chosen. I think if anything, the scoring system should include only information about someone’s ability to pay back money they’ve borrowed. If it goes outside of those parameters then it should include every bill a person pays or doesn’t pay so that they can prove they pay their bills on time. That’s a much more reliable expectation especially for those that do not borrow money. Thank God for eCredable because they get it. :)

LB, I actually don’t use eCredable but it is an option for people who want to prove their financial responsibility without playing the credit score game. I’ve been doing it without them so far and I see no reason to start now. If I was planning on getting a mortgage down the road I would probably sign up and the fees wouldn’t be a problem.

I think the verification process is important since the lender interested in the information would easily reject anything that has not been confirmed and authenticated. The value of the service in my opinion is higher than the value of chasing a credit score which to me has ZERO value whatsoever. I purchase things based on value not cost.

Sometimes personal finance isn’t about money and math. What’s important to you and what’s important to me are completely different. I make my financial decisions based on the goals we have for our family just as you do the same for yours. We’re doing things different than most people and we’re okay with that. :D

People seem to think that living without chasing your credit score is like giving up food or growing devil horns. haha! I think it’s quite hilarious. Keep in mind that I’ve lived trying to chase my score doing all the things you’re supposed to do to maintain it. Now I’m on the other side of the fence where all the weird and freaky people are and I love it so much more. I will never return to worshiping a score. Whatever it is or isn’t, I don’t care.

Sometimes peace of mind is more satisfying than following the herd. :)

HAHA, I totally agree, “Sometimes peace of mind is more satisfying than following the herd.” I did start finanicalblacksheep.com, because of the other way of looking at things. I would have to agree I don’t follow the herd. HA!

On a more serious note, I was checking out your website for a more detailed list of ways to not use a credit score and couldn’t find any. Do you have such a post or somewhere I could go for more detailed information? There is no way I am wading through all the posts here-just for partial information. Thanks!

Kind of like “if a tree falls in the forest and nobody hears it…” I guess a credit score doesn’t have to matter. But it doesn’t have to be avoided either. Kind of like insurance. I don’t plan on getting into a car accident…but it’s still good to have enough coverage just in case.

Kris – It doesn’t HAVE TO be avoided but it can so if I can avoid it why would I bother messing around with something I don’t need? Wouldn’t that be a complete waste of my time and energy? No thanks, I’ll spend my time and energy on things that are important to me and my family. :)

It’s NOT “kind of like insurance” either. You NEED insurance to protect yourself from loss. Having a credit score protects you from nothing at all. If anything worshiping it puts you at risk since chasing one involves debt. Debt is risk. :)

And for the record, I’ve checked my credit score three times since becoming debt free out of curiosity. The first time I received a “not enough information to determine a score”, and the second time (about 2 years ago) it said it was over 700, and this last time mentioned above.

“Remember that most people have TONS of debt and DO NOT pay off their credit cards each month. I believe it is because we’ve been brainwashed into thinking building a credit score was necessary in life which puts us in a position to rack up a lot of debt.”

Brad.. I am not sure this is a true statement. People carry balances on the credit card for a variety of reasons and the folks who get into trouble aren’t likely to be carrying a balance for the sole purpose to pad a credit score. What is more likely is that these individuals spend more than they make and aren’t as saavy when it comes to personal finance or maybe there is an unforeseen event that there was not enough emergency cash on hand.

Responsible borrowing is a beneficial tool for financial independence. I think the takeaway here is that there is no need to constantly monitor and dictate your financial decisions to increase or manipulate your credit score. I am in the “it depends” camp with respect to debt in general. For instance, I may have the money to buy a car outright but may not due so if I can get interest free financing. I can make my money “work” better by putting it to use by earning interest over the finance period (somewhat a mute point currently but rates will not be at less than 1% forever). Brad also hits the nail on the head when he said it’s all about your PERSONAL financial goals and priorities.

My final thought is do not discount the benefits of a good credit score. Many of the peeps on this post outlined a few of the benefits so I am not going to rehash the same. Don’t live your life chasing a credit score ( whether that is an 800 or 0). Instead, set goals and make decisions to reach them.

I’m commenting pretty late on this topic…but it’s so good I had to say something! My objective is to get to a financial place (sooner than later!) where I don’t have to worry about a score. I like Brad’s idea of living a life where a credit score isn’t part of the equation. Cash really is KING and it’s possible to live with any form of debt. Because of how our society is set up, it almost seems impossible to live without a score…but Brad is proving that logic wrong and setting a great example (in my opinion).

I believe the whole thing is a scam. First off its a government agencies yet it pretty much ran by these 3 for profit companies. In turn can and do control peoples way of life. Good luck ever
Find any information about who runs and who is behind any of the 3 credit companies. Very secretive which should be a bell and whistle to everyone. Whats worse they tell you how to build as well tell you it important to have good credit. Buying you loans and debt off is best thing and benefits you. So why is it you spend years building great credit and credit score it doesnt stay that way unless you keep some debt. Like myself i spend years in debt paid my bills. My Ex-Wife create even larger debt which was rewarded to me rather than her in the divorce. 70,000 plus a 130,000 mortage. Soon after house market exploded i sold that house for 410,000. Which in turn i was able to pay off all my Debt. My Credit score was at 810. After
paying off debt i was done with credit cards, loans or being in debt with anyone. Specially wi
The freedom they have with interest rates. Now it has been 9 years and my credit score as drop to 650. So why build any credit or good credit. Because in the end whether you paid or l,credit cards, etc. Or not it really doesnt matter. It all based on whether you have and can sustain eome debt so the powers that be can control you as well as keep tabs on ya!

Great conversation on an important topic! I wanted to make two points to all the readers and posters. eCredable allows consumers to choose how they want to manage their “credit life”. If you want to live debt free and avoid maintaining a traditional credit score, that’s fine. We’re here to help you when you need a home loan or a car loan. There are no monthly fees – you only pay for your credit report when you apply for the loan. The mortgage broker will very likely refund the cost of the AMP Credit Report(r) in your closing costs (~ $90). Same for the auto dealer – just ask them to rebate the credit report cost back to you as part of the sale.

If you choose the path of living with credit related products the rest of your life, AND you’re responsible enough to manage this effectively, we can help you as well. Even though today we only have two lenders in our network (Churchill Mortgage for home loans, and RoadLoans for auto loans), we expect to have a dozen by the end of 2013.

For those of you who question the validity of submitting the eCredable AMP Credit Report(r) as part of an application for a job, apartment, or credit application, I refer you to the Equal Credit Opportunity Act. The law REQUIRES that the potential creditor consider any information you submit that demonstrates your creditworthiness. If they don’t accept it, just refer them to the FTC who will fine them $10,000 per incident. The law is there for YOUR protection. Use it!

Hey, thanks for stopping by, Steve – appreciate it. Cool to see you all stay on top of social media and what not :) It’s nice to hear from some of the companies we blog about every now and then. Hope you have continued success in the new year!

Extremism? I think it’s extreme to pay 10-20% more for big ticket items like cars and homes and pretty rational to save up for a bit and use cash to pay less … I think one of Brad’s points is that in America some consider it “extreme” to choose to NOT pay 10-20% more for things.

I was an insurance agent and I cannot tell you how important a credit score is when calculating your home and auto insurance premium. I mean, I was dumbfounded when I saw just how much insurance went up when someone’s credit score dropped. It’s significant. However as far as insurance is concerned having no credit score is better than having a bad one.

In Denmark we don’t use credit scores. If you rent an apartment or need a loan, you provide them with your recent income statements. If it’s a big loan, like a mortgage, they also require tax documents and a budget.

If you don’t pay your bills, creditors can have you signed up in a register which will make future loans almost impossible until the debt has been paid.

I hope you don’t mind me commenting on this old post, but I thought you’d be interested in how it’s done in other places :)

I use Credit Karma to track mine, it’s free and keeps it all neatly in app format. I would love to be able to say that I won’t use credit ever again, but Murphy’s Law without a huge emergency fund has gotten me recently. I love the idea of paying cash for cars. Vehicle depreciation is insane and it isn’t worth the interest to pay for something that loses so much. Great Post!

Another perspective: worked hard….own our house, cars, everything…. Use a credit card to purchase everything possible for convenience and rewards. I have never once checked my credit score. I have never once tried to convince anyone that out way is the right way. When friends ask me for advice, I will tell them what we did because I like my friends, but that’s the only time I ever think about how unusual it is. Peace.

We own our home and cars outright and never plan to use debt again. We don’t need credit cards for emergencies since we have savings. We don’t know what our credit score is because we will never need it. I’ve chased FICO and payments and this way of living is much better :)

There are pros and cons just as mentioned for having a credit score or not.

The MAIN reason they invented this crap in the first place (credit) and it has just got out of control is to get people so under debt you are paying for it for most if not the rest of your life.

Seriously why would they NOT want you to pay interest over that long of a term, you are making the banks huge sums of cash. Mortgages, credit cards etc etc, and they make them always JUST out of reach of MOST people so they have to lend the money.

The economy would actually be a lot better if banks were not in such control of things and people would be a lot better off. The only way to make this happen though is if people stop relying on the credit system so much (I have) and never felt so much relief never having to worry about any repayments (apart from rent) coming out all the time, best thing I’ve ever done and I actually have MORE assets now than ever after getting out of debt and stop paying interest.

Rock on man – way to get out from under the madness! All this debt is considered so “normal” these days that most people don’t even second guess. Everyone they know has some too so what’s the big deal right? Crazy world we’re in… mortgages suck balls too, I hate sending a payment every month knowing the bulk of it is all going to interest only, ugh… but that’s what I get for not having figured out the $$ game back then. Good way to learn at least :)

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